Montpelier
Democratic lawmakers and Gov. Phil Scott, who fundamentally disagree over the use of a budget surplus and a property tax rate hike, would have to iron out a deal and pass a budget by July 1 in order to avert a shutdown.
If there is no agreement, it would be up to the Legislature to authorize emergency spending in a continuing resolution to keep government operations up and running.
The Scott administration, which adamantly has refused to accept any increase in property taxes, insists that an agreement with lawmakers is close at hand. Officials say a government shutdown isn’t in the cards.
But the governor hasn’t been willing to guarantee that a shutdown won’t happen, raising concerns that come July, agencies could be forced to stop providing critical public services.
One major consequence of a shutdown scenario is a hit to the state’s credit rating.
Unlike in Washington, D.C., where threats of government shutdowns have become a common occurrence, they’re a rarity in Vermont.
In fact, this was the first year in memory that legislators have not scheduled a veto session and left the Statehouse without a budget deal.
The only time in the state’s history lawmakers have needed to make an appropriation to extend budget negotiations into another fiscal year was in 1961, according to Stephen Klein, the Joint Fiscal Office’s chief fiscal officer.
On Wednesday, Scott summoned lawmakers back to Montpelier for a special session, and pressed them to adopt a proposal that uses $58 million in surplus money to buy down tax rates.
The plan also would enact education policy changes the administration says would yield $300 million in savings over five years and keep property tax rates at 2017 levels.
Democrats have rejected the idea of using one-time money to buy down tax rates. They want to use a $34 million state surplus to pay off retired teacher pension liabilities — a move they say will save taxpayers $100 million over 30 years.
Adam Greshin, the commissioner of the Department of Finance and Management, said the administration won’t budge. He believes lawmakers will come around soon and craft a proposal that meets with Scott’s approval.
“Until we work that out with the Legislature, we’ll be talking with them. But we do not anticipate going into July,” he said on Friday.
On Thursday, Scott told reporters that lawmakers would be equally responsible for a government shutdown.
“I don’t want to see a shutdown. … But it’s as much in their hands as it is mine,” he said. “I’m telling them what I’m going to do. I’m not signing a bill that raises taxes and fees, end of story.”
While House Republicans have pledged to back the governor on vetoes of the budget and tax bills, most Republicans voted for the proposals ahead of adjournment.
The budget passed unanimously in the Senate and with broad support in the House in a vote of 117-14.
Senate President Pro Tem Tim Ashe, D/P-Chittenden, told reporters last Wednesday that lawmakers will try to avoid a shutdown. But he said they won’t be beholden to Scott’s demands and hopes the governor will “move in (their) direction.”
“The truth is, we will do everything we can to keep government operating because it will be a huge embarrassment if we find ourselves in that position,” he said. “However the governor is not the only party in these discussions that is entitled to a non-negotiable position and so the Legislature will keep trying to do the fiscally sound thing.”
In a memo to the governor and legislative leaders on May 18, Vermont State Treasurer Beth Pearce urged the parties to avoid a government shutdown and resolve the budget impasse as quickly as possible.
Pearce painted a dire picture of the consequences a shutdown could have on state government and said it would likely harm the state’s credit rating.
“Other states have seen credit downgrades after they have not been able to work together to pass budgets,” she wrote. “The costs of these failures are borne by their citizens in the form of higher interest costs and greater difficulty in accessing capital. We do not want to go down that road.”
Pearce said even the threat of a shutdown could harm the state’s credit rating.
The administration says that by enacting its five-year education financing plan, it will be able to pay back the one-time money it uses to buy down tax rates and invest millions into early child care, higher education and technical learning.
The plan would generate savings through reforms to the special education system, a statewide teacher health care plan, a task force to accelerate school consolidation and a threshold that penalizes districts that spend above a certain level on their schools.